Mortgage Interest Relief

Mortgage interest relief is the way the tax system helps a landlord with the finance costs of a rental property, mainly mortgage interest, but also some related loan fees. For individual landlords in the UK who hold property in their own name, the old system (where mortgage interest was deducted as an expense before tax) has been abolished by “Section 24” of the Finance Act 2015.

Since April 2020, landlords are taxed on their full rental income and then get a limited tax credit for their finance costs, normally at the basic rate (20%). This can significantly increase the tax bill for higher-rate taxpayers, especially if they have large mortgages. Companies that hold buy-to-let property are treated differently: they can still deduct mortgage interest as a normal business expense before corporation tax is calculated.

From April 2027, a new property-only tax banding for unincorporated landlords is planned, with finance costs relieved via a 22% tax credit, slightly increasing support but still not restoring full relief.

For renters, mortgage interest relief does not give direct individual rights, but it shapes the economics of the sector. Section 24 and rising interest rates have pushed some landlords to sell, incorporate, or try to increase rents. Rent levels must still be set lawfully, prohibited fees remain banned, and tenants cannot be charged a special “tax surcharge” or similar to cover a landlord’s lost mortgage interest relief.